Ask Basic Finance Expert

Finance

problem: Assume we $4,000,000 currently invested in the UNITED STATE with a return of 10%. We are considering two $1,000,000 mutually exclusive investments, one in the UNITED STATE and the other in the euro zone, each of which will return 12%. We will invest in one of the projects. The spot rate is €0.75/$, the interest rates are 5% in both the euro zone and the UNITED STATE, the standard deviations of the returns is 20% on the original ($4,000,000) investment, 45% on the proposed UNITED STATE investment and 40 percent on the proposed euro zone investment. The current investment has a 15 percent covariance with the UNITED STATE project, a 20% covariance with the euro zone project and the covariance between the new UNITED STATE and euro zone project is 30 percent. find out the expected returns, the variance [or standard deviation], select the project that will maximize shareholder price & describe why the project that was chosen is appropriate.

Related Questions in Basic Finance

The mean salary offered to students who are graduating from Coastal State University this year is $24,230, with a standard deviation of $3678. A random sample of 85 Coastal State students graduating this year has been se ...

Explain why giving an independent central bank control over the quantity of money in the economy should reduce the occurrences of periods of extremely high inflation, especially in developing economies.

Write the word or phrase that best completes each statement or answers the question. Solve the problem. Round dollar amounts to the nearest dollar. Use the straight-line method to complete the depreciation table for a co ...

A 6-percent corporate coupon bond is callable in 10 years for a call premium of one year of coupon payments. Assuming a par value of $1,000, what is the price paid to the bondholder, if the issuer calls the bond? a. $60 ...

Securities Laws What was the purpose of the Securities Act of 1933? What was the purpose of the Securities Exchange Act of 1934? Do these laws prevent investors from making poor investment decisions? Explain.

Financial Reporting- Horizontal & Vertical Analysis You will submit the following in both a horizontal and vertical analysis of the company Starbucks': • Accounts Receivable • Fixed Assets • Debt Financing Use basic fina ...

Write an essay about comcast xfinity Explain The Cost of Unused Resource Capacity, The Lack of Clear Business Purpose, Lack of Senior Management Commitment, And how Individual and Organization Resistance to Change effect ...

4,153,160 Questions Asked

13,132 Experts

2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses,
Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.